Multistate Tax Commission Seeking to Revive UDITPA-Revision Debate?

In 2009, the Multistate Tax Commission's effort to  have  NCCUSL (Uniform Law Commission) undertake a rewrite of UDITPA (Uniform Division of Income for Tax Purposes Act) was defeated by industry groups when NCCUSL decided to put the rewrite effort on hold. Not to be deterred, the MTC has continued its efforts to rewrite UDITPA independent of NCCUSL, and on May 10, 2012, the Executive Committee of the MTC will have before it all the pieces of the project to rewrite UDITPA.

On March 7, the MTC Uniformity Committee approved for consideration by the Executive Committee the final pieces of the project which include: a draft revision of the definition of business income, a draft revised section on distortion relief, language narrowing the definition of sales, language revising sales factor sourcing of services and intangibles, and recommendations that the UDITPA apportionment formula be switched to a double-weighted sales factor. Each of these measures will be up for debate by the MTC Executive Committee at its May 10 meeting in Washington D.C.

The National Conference of State Legislators, one of the groups that was oppossed to the UDITPA rewrite in 2009, is again expressing its opposition, and it is likely that COST and other similar groups will again voice their opposition to the MTC's efforts in the coming weeks.

Stay Tuned.

You can follow me on Twitter: @TNTaxLawyer.

Tennessee Legislature Takes First Steps to Phase Out Inheritance Tax

The Tennessee Legislature took its first steps on March 21 to phase out the state's inheritance tax (SB3762/HB3760) as the House Finance Subcommittee unanimously approved an amendment that would repeal the inheritance tax by 2016.

The tax which brings in $100 million in annual revenue had been the target of repeal before the session started until Governor Bill Haslam expressed concern that the state does not have the resources to replace the revenue generated by the tax and that a full repeal could jeopardize the state budget if the economic recovery does not continue. Rather than pushing for a full repeal, the Governor in his State of the State address proposed a modest increase in the exemption level from $1 million to $1.25 million.

The Governor’s position appears to have change based on comments from Commissioner of Revenue Richard Roberts following the vote that the Legislature’s move was done with the support of the Haslam administration after reviewing the State budget and citing the recent increase in state revenue. “The thinking was that this is an important step toward (reducing) the tax burden in Tennessee on businesses and farmers,” Roberts stated following the vote.

The fiscal note on the Governor’s original proposal to increase in the exemption was estimated to be an annual $14 million recurring decrease in state revenue. Based on the amendment, the fiscal note will now increase to  an annual $100 million decrease in state revenue starting in 2016. It remains to be seen whether the fiscal impact will serve as an obstacle to efforts to repeal the tax.

Governor Haslam may have been emboldened by the recent repeal of the inheritance tax in Indiana, where the Governor signed a bill into law on March 20, phasing out the Indiana tax. In Tennessee, the Legislature appears poised to follow suit. However,  whether the bill passes will mainly be a product of whether Governor Haslam continues to believe that this is a prudent fiscal move.

The Bill will be considered by the full Finance Committee in the coming weeks.

Do you need a valuation expert in Tennessee?

The question that often comes up for property taxpayers in Tennessee when trying to decide whether to appeal a property tax valuation: How much is it going to cost? A significant factor in determining cost is whether or not the taxpayer will need to hire a professional appraiser.

Many times, taxpayers will go it alone and offer their own personal opinion regarding the valuation of the property, but if there is an appraiser on the other side, that is probably not the best approach. Take, for example, the recent decision in In re Directors Common, LLC. In that case, the property manager testified about the condition of the building and his inability to obtain a tenant to lease the space. Based on his experience (which was not unimpressive), he concluded that the value of the property was $600K. The Assessor presented the testimony of a certified appraiser who prepared a report with comparable sales and an income analysis that the property was worth $1.6 million.

The assessor adjusted the valuation down slightly but favored the appraiser over the testimony over the property manager.

That is not to say that in some instances, no appraisal is needed, but administrative law judges in Tennessee tend to be persuaded by the numbers. Thus, if you want to put forward your best case and cost/benefit analysis makes sense, that oftentimes means engaging the services of a professional appraisal.

http://www.comptroller.tn.gov/repository/SB/judgeminsky/2012.03.09-DirectorsCommonLLC.pdf

You can also follow me on Twitter: @TNTaxLawyer.

You May Be Right, But Statutes of Limitation Will Drive You Crazy

Tennessee's unauthorized substance tax (aka the "Crack Tax") has received a lot of publicity over the last few years as it was being challenged by numerous "taxpayers" on constitutional grounds. In the end, the Tennessee Supreme Court ruled that the tax was unconstitutional, meaning that all those lawsuits that were pending were lined up for refunds or abatements of the pending assessments.

Not so fast...

Along comes Swafford v. Commissioner of Revenue, a recent Tennessee Court of Appeals decision that has held that despite the Crack Tax being unconsitutional, one plaintiff is not entitled to get his money back because his claim was filed beyond the applicable statute of limitations period. Mr. Swafford paid the tax back in 2005 and did not get around to filing a claim for refund until after the 2009 decision in Waters v. Farr, 291 S.W.3d 873 (Tenn. 2009) was decided. His claim was beyond the three-year statute of limitation, which had expired in December of 2008.

Mr. Swafford's loss is a reminder for taxpayers of all kinds in Tennessee. That is ... the deadlines that you cannot miss are the deadlines to file a refund or to file a lawsuit challenging the denial of a claim for refund. If you do that ... you may be right, but the statute of limitations will drive you crazy.

 Decision: http://www.tncourts.gov/sites/default/files/swaffordjameswopn.pdf

For more Tennessee Tax Updates, follow me on Twitter: @TNTAXLAWYER